The investment plan becomes a plan when the steps of implementation become a priority. It becomes the goal of every investor to make his/her investment plan become a priority. In the earlier years of one’s investment planning, it may seem very easy, but achieving this goal requires effort and time. The initial steps of investment planning are the most critical ones.
Purpose Of Your Investment Plan
First, you have to decide on what the major purpose of your investment plan is. This will define the nature of investment activities that you need to perform in order to achieve your purpose. Investment goals therefore help you decide the priority of investment activities that need to be performed. It becomes important to set forth the priority list so that all possible investment plan aspects such as operating expenditure, fixed income instruments, short term and long term growth plans can be analyzed effectively.
Second, setting up the financial objectives and setting up a time frame for the realization of these objectives becomes the next important step in investment planning. The objective of investment plan can either be to earn enough profit to justify further investment or it can be to buy shares or mutual funds and use them for the purpose of investment. A financial estimate based on these aims and objectives determines the amount of investment capital required. This capital is needed for both the short term (working capital) and long term (fixed income instruments) purposes of the investment plan. The financial estimate form the first step of the investment planning process because it helps you in determining the amount of capital required for each plan aspect.
Setting Up The Investment Plan
Third, setting up the investment plan becomes the next important step. If the purpose of investment plan is to earn enough profit, it is not necessary to spend all the profits. A portion can be diverted for other purposes. Also if the purpose is not to earn any profit, then there is no necessity of making any investment. Investment should be done only when investment plan becomes a feasible option.
Fourth, while investment plan becomes a reality, the need for investment capital also increases. The rate of return on investment also increases. Thus investment becomes a profitable venture for all those involved. Also, if the purpose of the investment plan is not to earn profits, then it can also become a riskier venture. The rate of return on investment varies from one financial instrument to another financial instrument.
Proper Analysis Of Investment
Fifth, finally, after proper analysis of investment opportunity and proper evaluation of risks, the capital is invested. The process of investment capital includes borrowing from banks, borrowing from other financial institutions like financial institutions or private lenders etc. Finally, the end result of investment plan becomes a profitable venture if the capital is wisely used. Investment plan needs to be reviewed periodically for better results.
Therefore, the above said are some of the important steps involved in the investment planning process. Like any other investment plan, investment planning process should be well implemented so that the best results can be achieved. This planning is the only way to get the maximum return on investment. Investment planning process helps to accomplish the goals and objectives without wasting time, money and efforts. Thus investment planning process becomes an important tool for achieving financial stability.